Pay-Per-Mile Car Insurance: Everything You Need to Know

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Written by Lindsay Frankel Edited by Lequita Westbrooks Reviewed by Amanda Clear

Updated November 15, 2023

If you don’t drive often, it may feel like you’re throwing away money on car insurance. In this case, an alternative auto insurance policy like pay-per-mile car insurance might be a better option for you than a traditional auto insurance policy.

With pay-per-mile insurance, you’ll typically pay a low base rate plus a variable rate based on the miles you drive. Low-mileage drivers can save money with this type of policy — but there may be drawbacks.

We’ll cover what pay-per-mile insurance is, who it’s best for, and which companies offer the best options.

Key Takeaways:

• Traditional insurance policies often include low-mileage discounts, but pay-per-mile auto insurance may save you even more if you drive far fewer miles than average.
• Pay-per-mile insurance plans require you to track your mileage by installing a telematics device or taking a picture of your odometer.
• Your rate for pay-per-mile insurance varies each month based on your mileage.

What Is Pay-Per-Mile Insurance?

Pay-per-mile insurance is a type of car insurance that allows you to pay a variable monthly premium based on how much you drive. Most companies charge a monthly base rate that never changes plus a per-mile rate.

If you drive infrequently, you may benefit from the usage-based rate. For example, if you work from home and only take short local trips, you might save money with a pay-per-mile insurance policy.

Factors like your driving history and age will affect your base rate and per-mile rate, just like with traditional car insurance.

But unlike a normal car insurance policy, your pay-per-mile insurance rate may change from month to month. Your insurer will also require you to track your mileage, which could be as simple as taking a picture of your odometer or may be more invasive.

How Does Pay-Per-Mile Car Insurance Work?

Pay-per-mile insurance companies require you to track your mileage and use different methods of verifying how much you drive.

For example, Metromile requires you to plug a telematics device into your car’s diagnostics port, which automatically calculates your mileage, while Mile Auto requires you to snap a picture of your odometer every month.

Car insurance companies that offer pay-per-mile insurance use your mileage to calculate your monthly rate. You’ll pay a base rate plus a per-mile rate, which is multiplied by the number of miles you drive to determine your bill for the month.

For example, let’s say your base rate is $30 and your per-mile rate is $0.06/mile. If you drive 100 miles one month, your car insurance premium would be just $36 for that month. If you drive 200 miles the next month, your premium would go up to $42 for that month. Bear in mind that your base rate and per-mile rate may vary from this example.

Note that some companies offer usage-based insurance programs, which consider your mileage in addition to other driving behaviors.  These are different from mileage-based programs.

Who Should Use Pay-Per-Mile Insurance?

Pay-per-mile insurance is a good option for anyone who drives fewer than 10,000 miles per year. But you’ll want to make sure the pay-per-mile insurance company you choose meets your needs. For example, you should evaluate available coverages, discounts, and third-party ratings that look at the company’s financial strength and customer satisfaction.

You may want to consider pay-per-mile insurance if:

You work from or near home

If your commute is short or you work remotely and only drive short distances, you may benefit from pay-per-mile instead of a traditional insurance policy. Your monthly mileage rate multiplied by the number of miles you drove may result in a lower premium than traditional insurance coverage.

You have an extra car or seasonal vehicle

If you have a convertible that you only drive during the summer or you keep an extra car that you rarely drive, you might save money by insuring that vehicle with a pay-per-mile insurance policy.

You’re a college student

If you’re a student away at school and leave your car at home — or even if you have your car on-campus but only use it occasionally — a pay-per-mile insurance policy could make sense for you.

You’re retired

People older than 65 only drive an average of 7,646 miles annually, according to the Federal Highway Administration (FHA). If you’re retired and don’t frequently use your car, you may want to consider purchasing pay-per-mile insurance.

How Much Can You Save With Pay-Per-Mile Insurance?

Estimated savings when compared to traditional auto insurance vary by company. For example, Mile Auto estimates that low-mileage drivers can save between 30% and 40%, while Metromile says its customers save an average of 47%, or up to $947 per year. Some companies don’t provide estimates, but the less you drive, the more you’ll likely save.

Your specific rate may vary from one company to the next since each company evaluates your driving profile a little differently. For example, some companies may increase the base rate for drivers with accidents on their records. That’s why it’s important to compare quotes from each company that offers pay-per-mile insurance in your area.

4 Companies Offering Pay-Per-Mile Insurance

The table below shows the average savings you can expect from the four companies offering pay-per-mile insurance, along with the state availability of each company.

Note that no insurance companies offer pay-per-mile insurance in Alaska, Hawaii, Louisiana, North Carolina, or New York. Once you’ve narrowed down your options to companies available in your state, you’ll want to consider more than just the estimated savings.

Let’s take a look at each pay-per-mile insurance company in more detail so you can weigh the pros and cons.

Allstate Milewise

Allstate’s Milewise program tracks mileage through a device in your car’s diagnostics port and also offers an app you can use to manage your policy.

With the pay-per-mile option, you’re charged a daily base rate plus a per-mile rate, and you’ll be billed once you reach a minimum balance. Your insurer will limit your daily mileage to 150 or 250 miles, depending on the state, so a road trip won’t result in an astronomical bill.

Estimated Savings: Undisclosed

Pros:

• Above-average ranking for claims satisfaction by J.D. Power
• AM Best financial strength rating of A+ (Superior)
• Pay-per-use roadside assistance available

Cons:

• Uses telematics-based device that also tracks your location
• Charges for 40 miles per day if the device isn’t installed/working
• Not available in most states

Metromile

Metromile, a Lemonade company, measures miles through a telematics device plugged into your OBD-II port. It also offers a smart driving app you can use to access other benefits, like street-sweeping alerts in select cities. You can also turn off location tracking on the device. There’s a 150–250 daily mile cap on mileage-based charges.

Estimated Savings: 47%, or $741 per year, on average

Pros:

• Roadside assistance add-on available
• Additional available discounts in some states

Cons:

• High complaint rate with the National Association of Insurance Commissioners (NAIC)
• Poor customer reviews with the Better Business Bureau (BBB)

Mile Auto

Instead of requiring you to install a device in your vehicle, Mile Auto asks you to send a photo of your odometer each month and provides text alerts to remind you. Some people prefer this method of mileage tracking for privacy reasons, but there’s no mobile app or additional telematics benefits. Mile Auto charges a monthly base rate plus a per-mile rate and doesn’t offer a cap on mileage charges.

Estimated Savings: 30% to 40% off current rates for low-mileage drivers

Pros:

• No required telematics device
• Roadside assistance available

Cons:

• No daily mileage cap
• No mobile app

Nationwide SmartMiles

Nationwide SmartMiles offers a broader selection of coverage options than other pay-per-mile companies. It also caps charges at 250 miles per day — so, if you go on a long road trip, you won’t be charged for miles beyond this limit.

The company uses a device installed in your diagnostics port and works with certain connected cars that don’t require a device. You’ll be charged a monthly base rate plus a per-mile rate for your variable monthly premium.

Estimated Savings: Undisclosed

Pros:

• Available in 44 states
• Fewer complaints than expected with the NAIC
• A+ (Superior) financial strength rating from AM Best

Cons:

• Required telematics device
• Below-average claims satisfaction rating with J.D. Power
• Poor customer reviews with the BBB

Pay-Per-Mile Car Insurance FAQs

You may have questions when comparing pay-per-mile insurance options and traditional car insurance policies. Here are the answers to some of the most common questions about pay-per-mile plans.

How much does pay-per-mile insurance cost?

The cost of pay-per-mile or low-mileage car insurance varies based on your driving history, age, location, type of vehicle, and other factors. Companies generally charge a base rate, which you’ll be billed even if you don’t drive at all, plus a per-mile rate, which fluctuates.

Does pay-per-mile Insurance include full coverage?

It’s your choice. When applying for a pay-per-mile auto policy, you can choose from different levels of liability protection or full-coverage insurance.

Some companies also offer add-ons, like roadside assistance. Your insurance premiums will reflect the coverage you choose.

How do insurers check mileage?

Insurance companies either use a telematics device installed in your vehicle or require you to snap a monthly photo of your odometer to track your mileage.

Is pay-per-mile the same as usage-based insurance?

No. Pay-per-mile insurance is a type of usage-based insurance, but rates for pay-per-mile insurance are based solely on your mileage and the information in your driver profile.

Usage-based insurance programs also use other factors, like your driving habits and when you drive.

Can you customize a pay-per-mile insurance policy?

Yes. You can choose your coverage options and limits for a pay-per-mile policy just as you would with conventional auto insurance. However, insurers that only offer pay-per-mile insurance may offer fewer specialty coverages than traditional insurers.

Can you get additional discounts with a pay-per-mile policy?

Sometimes. Depending on where you live and the company you choose, you may be eligible for additional discounts, like a safe driving discount or multi-vehicle discount.

Sources

1. J.D. Power, “2023 U.S. Auto Claims Satisfaction Study,” Accessed October 30, 2023.
2. AM Best, “AM Best Takes Various Credit Rating Actions on The Allstate Corporation and Its Subsidiaries,” Accessed October 30, 2023.
3. National Association of Insurance Commissioners, “Results by Complaint Index,” Accessed October 30, 2023.
4. Better Business Bureau, “Metromile,” Accessed October 30, 2023
5. Better Business Bureau, “Nationwide,” Accessed October 30, 2023.

Lindsay Frankel Insurance Writer

Lindsay Frankel is a content writer specializing in personal finance and insurance topics. Her work has been featured in publications such as Investopedia, LendingTree, The Balance, SFGate, Bankrate, and FinanceBuzz.